Sri. HARMOHINDER OMPRAKASH VERMA, MUMBAI V. CIT (A)-VIII, MUMBAI

ITA 6988/MUM/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1467 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 14-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 22-12-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: JEETENDRA SINGH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Opportunity of being heard; Valuation report; Capital Gains
• Section: 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SMT.ASHA VIJAYARAGHAVAN , JM ITA NO.6988/MUM/2006 : ASST.YEAR 2003-2004 SHRI HARMOHINDER OMPRAKASH VERMA 5A/2 SANGEETA APARTMENTS JUHU TARA ROAD, SANTACRUZ (WEST) MUMBAI 400 049. PA NO.AABPV2994N. VS. THE INCOME TAX OFFICER WARD 8(2)(3) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI K.GOPAL & JEETENDRA SINGH RESPONDENT BY : SHRI JAGDISH O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 13.10.2006 IN RELATION TO THE ASSESSMENT YEAR 2003-2004. 2. THE ASSESSEE HAS FILED REVISED GROUNDS. FIRST TH REE REVISED GROUNDS DEAL WITH THE SALE OF FLAT BY THE ASSESSEE TO M/S.MAGNUM COMM UNICATIONS PRIVATE LIMITED WHICH WAS HELD BY THE ASSESSING OFFICER TO BE INGEN UINE AND COLOURABLE DEVICE AND THE RESULTANT LONG TERM CAPITAL GAIN WAS SUBJECTED TO TAX ON PROTECTIVE BASIS. BRIEFLY STATED THE FACTS OF THESE GROUNDS ARE THAT THE ASSE SSEE IS A DIRECTOR OF M/S.MAGNUM COMMUNICATIONS PRIVATE LIMITED. SALE OF FLAT BEARIN G NO.2 IN BUILDING 5A, JUHU SANGEETA APARTMENTS WAS SHOWN BY HIM TO COMPANY FOR A CONSIDERATION OF RS.12,10,000. LONG TERM CAPITAL GAIN ON THE SAID SA LE WAS SHOWN AT RS.3,58,227 WHICH WAS CLAIMED AS EXEMPT U/S.54 AS THE SUM OF RS .3,75,000 WAS DEPOSITED IN CAPITAL GAINS ACCOUNT WITH BANK OF INDIA. PARA 2.2 OF THE ASSESSMENT ORDER DIVULGES THAT THE SALE OF FLAT BY THE ASSESSEE TO M/S.MAGNUM COMMUNICATIONS PRIVATE LIMITED WAS TREATED BY THE A.O. AS INGENUINE AND CO LOURABLE DEVICE IN DETAILED ORDER PASSED IN THE CASE OF SUCH COMPANY U/S.143(3) . ACCORDINGLY LONG TERM CAPITAL ITA NO.6988/MUM/2006 SHRI HARMOHINDER OMPRAKASH VERMA 2 GAIN FROM THE ALLEGED SALE OF FLAT IN THE HANDS OF THE ASSESSEE WAS TAXED ON PROTECTIVE BASIS. NO RELIEF WAS ALLOWED IN THE FIRS T APPEAL. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTED THAT THE CASE OF M/S.MAGNUM COMM UNICATIONS PRIVATE LIMITED CAME UP FOR ADJUDICATION BEFORE THE TRIBUNAL IN ITA NO.3963/MUM/2006. VIDE ORDER DATED 10.9.2009 THE TRIBUNAL, IN PRINCIPLE, HELD THAT THERE WAS A GENUINE TRANSFER OF ASSET BY THE ASSESSEE TO THE COMPANY. IN VIEW OF THE AFORE-NOTED TRIBUNAL ORDER IT BECOMES APPARENT THAT THE TAG OF INGENUINE AND COLOURABLE DEVICE GIVEN BY THE AUTHORITIES BELOW HAS BEEN REMOVED BY THE TRIBUNAL IN THE CASE OF M/S.MAGNUM COMMUNICATIONS PRIVATE LIMITED, AS A RE SULT OF WHICH THE TRANSACTION OF SALE OF FLAT BY THE ASSESSEE TO THIS COMPANY BECOMES GENUINE. LONG TERM CAPITAL GAIN IS HEREBY DIRECTED TO BE CONSIDER ED ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSESSEE. 4. REVISED GROUND NO.4 IS AGAINST THE APPLICATION O F SECTION 50C OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE CALCULATION GIV EN BY THE ASSESSEE TOWARDS SALE OF THE ABOVE REFERRED FLAT TO M/S.MAGNUM COMMUNICAT IONS PRIVATE LIMITED WAS NOT CORRECT. CONSIDERING ANOTHER SALE TRANSACTION I N BUILDING 7A, JUHU TARA APARTMENTS, THE ASSESSING OFFICER OPINED THAT SECTI ON 50C WAS APPLICABLE AND SUCH RATE FOR STAMP DUTY PURPOSES WAS LIABLE TO BE CONSI DERED. HE WORKED OUT THE AMOUNT OF LONG TERM CAPITAL GAIN AT RS.6,22,115. AF TER ALLOWING EXEMPTION U/S.54 FOR A SUM OF RS.3,75,000, HE COMPUTED LONG TERM CA PITAL GAIN OF RS.2,47,115 SUBJECT TO TAX ON PROTECTIVE BASIS. THE LEARNED CIT (A) UPHELD THE A.O.S ACTION IN REJECTING THE VALUATION SHOWN BY THE ASSESSEE AT RS .12,10,000 AND ADOPTING THE VALUE AT RS.14,73,888 RELYING ON VALUATION REPORT O F M/S.SAMOON & ASSOCIATES IN RESPECT OF FLAT NO.7 BUILDING 7A, JUHU TARA APARTME NTS. ITA NO.6988/MUM/2006 SHRI HARMOHINDER OMPRAKASH VERMA 3 5. THE CASE OF THE LEARNED A.R. IS THAT SINCE NO RE GISTRATION OF THE SAID FLAT TOOK PLACE IN THE YEAR IN QUESTION, THERE WAS NO LOGIC I N CONSIDERING THE PROVISIONS OF SECTION 50C AS PER WHICH THE VALUE ADOPTED OR ASSES SED BY ANY AUTHORITY OF A STATE GOVERNMENT, BEING STAMP VALUATION AUTHORITY BE CON SIDERED AS FULL CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TRANSFER. THE LE ARNED A.R. ARGUED THAT THE RESORT TO SECTION 50C WAS IMPERMISSIBLE. HE RELIED ON ORD ER PASSED BY THE JODHPUR BENCH OF THE TRIBUNAL IN THE CASE OF NAVNEET KUMAR THAKKAR VS. ITO [(2008) 110 ITD 525 (JODH.) (SMC)]. THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT CO NTROVERT THE FACTUAL POSITION STATED BY THE LEARNED A.R. THA T THE SALE DID NOT TAKE PLACE BY WAY OF REGISTRATION OF SALE DEED IN THE INSTANT YEA R. HE HOWEVER MAINTAINED THAT THE PROVISIONS OF SECTION 50C WERE OTHERWISE ALSO APPLI CABLE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ONLY QUESTION TO BE DETERMINED IN THIS GROUND OF APPEAL IS ABOUT THE ATTRACTABILITY OR OTHERWISE OF SECTION 50C. IT IS AN ADMITTED POSITION THAT THOUGH THE FLAT WAS SOLD IN THIS YE AR BUT REGISTRATION OF SALE DEED WAS NOT EFFECTED IN THIS YEAR. SECTION 50C PROVIDES TH AT WHERE THE CONSIDERATION RECEIVED OR ACCURING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VA LUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVERNMENT FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO `ADOPTED OR ASSESSED SHALL, FOR THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF TH E CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. THE JODHPUR BENCH IN NAVNEET KUMAR THAKKAR (SUPRA) HAS HELD THAT SECTION 50C DOES NOT APPLY TO THE CA SES IN WHICH THE TRANSFER OF PROPERTY IS NOT THE SUBJECT MATTER OF R EGISTRATION. IT IS NOTICED THAT AN AMENDMENT HAS BEEN CARRIED OUT TO SECTION 50C BY TH E FINANCE (NO.2) ACT, 2009 WITH EFFECT FROM 1.10.2009 AS PER WHICH THE WORDS OR ASSESSABLE HAVE BEEN ADDED TO THE WORDS THE VALUE ADOPTED OR ASSESSED. SINCE THIS AMENDMENT IS PROSPECTIVE, IT WILL NOT APPLY TO ASSESSMENT YEAR 2003-2004 UNDE R CONSIDERATION. IN SUCH A ITA NO.6988/MUM/2006 SHRI HARMOHINDER OMPRAKASH VERMA 4 SCENARIO THE QUESTION OF REFERENCE TO THE VALUE FOR STAMP DUTY PURPOSES IN OTHER CASES DOES NOT ARISE FOR SUBSTITUTION WITH THE FUL L VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. IT IS, THERE FORE, DIRECTED THAT THE CAPITAL GAIN BE WORKED OUT ON THE BASIS OF SALE CONSIDERATION AS PE R AGREEMENT TO SALE IN THE PRESENT CASE. THIS GROUND IS ALLOWED. 7. GROUND NO.5 WAS NOT PRESSED BY THE LEARNED A.R. THE SAME IS, THEREFORE, DISMISSED. 8. GROUND NO.6 IS AGAINST THE COMPUTATION OF INCOM E FROM HOUSE PROPERTY BY WAY OF ADOPTION OF NOTIONAL RENT OF RS.10,000 PER M ONTH INSTEAD OF RS.46,665 DECLARED BY THE ASSESSEE. THE LEARNED COUNSEL FOR T HE ASSESSEE, AT THE VERY OUTSET, SUBMITTED THAT THE ASSESSEE HAD TAKEN GROUND NO.1(V I) BEFORE THE LEARNED CIT(A) IN FORM NO.35 CHALLENGING THE FINDING OF THE AO ON THI S POINT, BUT INADVERTENTLY SUCH GROUND REMAINED TO BE DISPOSED OFF. WE HAVE PERUSED THE IMPUGNED ORDER AND FIND THAT, IN FACT, THE LD. FIRST APPELLATE AUTHORITY HA S NOT DECIDED IT. IN THE ABSENCE OF ANY DECISION GIVEN BY THE LEARNED CIT(A) ON THIS POINT WE RESTORE THE MATTER TO HIS FILE FOR DISPOSAL OF THIS GROUND ON MERITS AS PER LAW AF TER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 18 TH DAY OF JUNE, 2010. SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 18 TH JUNE, 2010 . DEVDAS* ITA NO.6988/MUM/2006 SHRI HARMOHINDER OMPRAKASH VERMA 5 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A)-VIII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.